After a meeting with the ruling military council, Information Minister Osama Heikal said Egyptian authorities would take all necessary steps to preserve order, including the protection of embassies.
Calling the unrest an "attack on Egypt's image" he added: "It is clear that the behaviour of certain people menaces the Egyptian state in its entirety." And he warned: "Exceptional circumstances demand decisive judicial measures."
Cairo would apply "all articles" of an emergency law in force for 30 years that provided greater powers to the judiciary and police, he said.
The attack was the worst episode since the killing of five Egyptian policemen last month on the border as Israel hunted militants after a deadly attack. Ties have generally been warming but that marked a serious downturn.
In Jerusalem, the Israeli government said Ambassador Yitzhak Levanon would return to Egypt only after security could be guaranteed.
Levanon, other staff and their families left Egypt early Saturday, leaving the deputy ambassador to maintain contact with the Egyptian government.
Israeli Prime Minister Benjamin Netanyahu called the mob attack late on Friday in Cairo a "serious incident", but said his country was "committed to preserving peace with Egypt, which is in the interest of Egypt and Israel."
The embassy attack, which saw staff rescued by commandos, was the worst since Israel established its mission in Egypt after Cairo became the first Arab country to sign a peace treaty with the Jewish state, back in 1979.
Three people were killed in clashes overnight Friday to Saturday between police and protesters outside the abandoned embassy.
More than 1,000 people, including 300 policemen, were also injured in the unrest, which continued through the night, medical and security sources said, as authorities struggled to get a grip on the anti-Israeli protests.